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Billionaire Wayne Huizenga Sued Over Acquisition

Billionaire H. Wayne Huizenga, who made his first fortune from his waste-management business, was sued in June by former owners of a South Florida-based trash company Choice Environmental for inducing them to sell their company with misrepresented financial information.

Billionaire Wayne Huizenga at his hangar in Florida, one of his choppers at the rear.

Glen Miller and Neal Rodrigue, former owners of Choice Environmental, filed a 92-page complaint against Huizenga, former chairman of Charlotte, N.C.-based Swisher HygieneSwisher Hygiene Inc., and his two business partners, former Swisher CEO Steven Berrard and former CFO Michael Kipp, in the U.S. District Court in South Florida on June 11. According to the suit, Huizenga and Berrard allegedly concealed material financial information and breached the merger agreement, which caused the plaintiffs economic losses of more than $40 million.

“You’re not just looking at some mangers. You are looking at a group of powerful people who know how to run things,” said Bud Bennington, partner at Shutts & Bowen LLP and lawyer for the plaintiffs. “Promises were made, but they were never fulfilled.”

According to his spokesperson, Huizenga, who announced in April he would not seek re-election as chairman of Swisher, was not available for comment. His 14% stake in Swisher is worth less than $24 million, or just about one-hundredth of his $2.45 billion net worth.

After being personally wooed by Huizenga, Miller and Rodrigue agreed in 2011 to sell their privately-held waste-management company to Swisher, a publicly-traded company listed on NASDAQ and Toronto Stock Exchange, for $50.1 million in stock and $41.5 million of assumed debt in the process. As part of the merger agreement, they were guaranteed management roles as CEO and EVP of Mergers and Acquisitions at Choice after the merger.

The deal closed on March 1, 2011, with Swisher’s stock trading at $5.89 per share on NASDAQ that day. As a result of the merger, Miller and Rodrigue became the fourth largest shareholders in Swisher, with collective shares of common stock valued at more than $50 million at that time. Those shares are now worth approximately $8 million.

After buying Choice, Swisher continued on its acquisition spree, picking up nine franchisees and 45 independent businesses through the first nine months of 2011. Forbes wrote a favorable profile of Huizenga’s attempt to get back in to trash that fall. “We’re not passive management with a few stock options,” Huizenga told Forbes in 2011. “If we don’t do well, we don’t just not make money, we lose money.”

But things started to unravel in late March of the following year when Swisher’s Audit Committee announced thatthe company’s previously issued interim financial statements (for the quarterly periods ended on March 31, June 30, September 30 in 2011) should not be relied on. Swisher’s stock plunged in the days after the announcement. By mid-May, it received lack of compliance notification from NASDAQ and two days after that Swisher announced an aggregate of approximately $4.6 million in increase to net loss before income taxes for the affected periods. On May 17, 2012, Swisher’s stock closed at $1.57 per share.

Berrard resigned as CEO in August. Several months later, in November 2012, Swisher unloaded Choice Environmental to ProgressiveProgressive Waste Solutions, a Canadian waste-management company, for cash consideration of $123.3 million. Huizenga and Berrard allegedly refused to involve Miller and Rodrigue in the negotiations with Progressive. Swisher’s attorneys also allegedly attempted to force Miller and Rodrigue to sign a Separation Agreement ending their employment with Choice, which the plaintiffs refused to sign.

The plaintiffs finally sued in June this year, alleging thatHuizenga and Berrard breached various aspects of their Merger Agreement by selling the company. Swisher allegedly issued the shares to the plaintiffs in a lump sum in 2012, well after the time they were required to be provided under the Agreement. Since the shares could not be traded due to Swisher’s fraud, the untimely issuance of stocks allegedly forced the plaintiffs to hold on their shares as the stock continued to decline.

The plaintiffs also alleged that Swisher grew too quickly without adequate internal accounting controls. Swisher acquired more than 50 businesses in 2011, according to the complaint.

“Huizenga and Berrard each knew, or each should have reasonably known, that Swisher’s accounting controls, capacity, and operating systems were designed for organic growth—rather than rapid growth by acquisition—and were therefore inadequate for such an aggressive acquisition program,” the complaint states.

Due to delayed financial filing, Swisher was delisted by the Toronto Stock Exchange in March this year. By May, Swisher finally filed all the restated quarterly reports from 2011 and the required quarterly and annual filings in 2012. The Toronto Stock Exchange reversed its delisting decision and let it resume trading in June 2013. Swisher’s stock was at $0.97 per share at 9:30 a.m. on Wednesday, July 10.

The company currently faces six other shareholder lawsuits filed in federal courts in North Carolina and New York regarding its previously issued interim financial statements, according to its most recent 10-Q.

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